Continuing the Effort to Curb Excessive FAA Salary Costs

About the Author

Legislation (H.R. 2881) to reauthorize the Federal Aviation
Administration (FAA) includes a provision (Section 601) to overturn
the 2006 contract settlement between the FAA and the 14,000 air
traffic controllers. That contract is estimated to save taxpayers
$1.9 billion over the next five years and $7.5 billion over the
next ten. The settlement followed extensive negotiations between
the FAA and the National Association of Air Traffic Controllers
(NATCA), and was implemented under the provisions of the special
bargaining rights and responsibilities established by the Clinton
Administration and Congress in 1996. In July 2007, the Federal
Labor Relations Authority dismissed NATCA's claim that the FAA
failed to bargain in good faith. Congress should reject any effort
to use reauthorizing legislation to cancel a contract whose
settlement fully adhered to existing law. If Congress passes
legislation that overturns the 2006 settlement, President Bush
should exercise his veto authority.

Background
When the previous contract between the FAA and the air traffic
controllers expired in September 2005, discussions over its
replacement began in earnest. With average controller compensation
then totaling $166,000 per year, the FAA's plan was to slow the
growth in controller compensation costs, bringing them more closely
in line with overall private and government pay patterns.

After eight months of fruitless negotiations with the controllers'
union, the FAA declared that negotiations were at an impasse and,
as the law requires, sent its final wage and benefit offer to
Congress for review. Under current law, unless Congress disapproves
the offer within 60 days, the FAA's final and best offer will
be the compensation package governing controller salaries for the
next five years. June 5 was the deadline, and the effort to
disapprove the contract died in the Senate.

Under the FAA's final offer, total controller compensation would
rise to $187,000 over five years, in contrast to the more than
$200,000 the controllers wanted when negotiations began.

The Current Law At the behest of the Clinton Administration in 1996,
Congress enacted legislation that gave the government's air traffic
controllers the right to bargain with the federal government over
pay, benefits, and work rules-a privilege unavailable to the vast
majority of other federal workers, then or now.[1] With this new
bargaining power, the air traffic controllers in 1998 extracted a
sweetheart deal of extraordinary generosity from a compliant White
House.

According to the FAA, base pay for the 14,500 controllers
soared 75 percent over the next seven years, rising from $64,877 in
1998 to $113,615 in 2005-when the previous contract expired.
Including premium pay for location upgrades and other salary
add-ons, average controller cash compensation reached
$128,000 in 2005. When benefits are included, total compensation
averaged $166,000 in 2005. For a select group of 1,300 controllers,
seniority, premium pay, and overtime boosted their total pay and
benefit package above $200,000 that year. The union is now seeking
to reopen negotiations in the hope of achieving a more generous
contract.

Negotiating a New Contract In defense of their high pay and even higher demands,
NATCA contends that its members' generous compensation is justified
by their stressful work and the critical importance of ensuring the
safety of millions of airline passengers. The union also contends
that the indices to which their pay is contractually linked, not
the 1998 contract, caused the pay escalation.[2]

While compensation should be commensurate with the required skills
and the effort expected of the workforce, a review of compensation
for other professions requiring similar skills and on which the
public safety depends found that controller pay is unusually
generous. Table 1 provides comparative pay data for similar or
related professions at the time that contract negotiations
began.

Despite generous salaries and early retirement benefits, the
controllers wanted a new five-year contract that included an 18
percent pay increase, which would increase cash earnings from
$128,000 to $151,000 and push total compensation to more than
$200,000 by the last year in the contract. The federal government's
counteroffer was to allow cash pay to rise from an average of
$128,000 in 2005 to $140,000 over the five-year contract.
Including benefits and other factors, total compensation
would rise from $166,000 to $187,000 over the contract period.[3] The
government also proposed to create a new pay tier for new
hires.

After the existing contract expired in September 2005 and efforts
to negotiate a new one reached an impasse, the FAA invited the
Federal Mediation and Conciliation Service (FMCS) to join the
discussions to help reach a deal. Even with the FMCS, the impasse
persisted, and negotiations broke down in early April 2006. The
delay in reaching a new agreement was caused in part by the flaws
and peculiar provisions in the 1998 agreement that work both for
and against the controllers union, depending upon the rate of
progress in the negotiations.

To the controllers' considerable benefit, they continued to
receive pay increases after the expiration of the previous contract
in September 2005. Under the "evergreen" terms of the original
contract, between the contract's expiration and an agreement on a
new one, controllers still receive annual pay increases "at a rate
that is the greater of the government-wide increase plus 0.8
percent or the agency-wide increase." In other words, despite the
absence of a new contract, controllers continue to receive larger
pay increases than their counterparts elsewhere in the civil
service. As a consequence, the union's incentive to negotiate a
compromise agreement with the FAA was greatly diminished.

However, the 1998 contract was not totally one-sided. It provided
the government with some remedies in the event that the union
became intransigent and abused its new privileges. Specifically,
the 1998 contract included a safety valve that allows the FAA-if
good-faith negotiations came to a complete impasse-to impose a
contract on the controllers, subject to congressional action. That
impasse arrived on April 5, 2006. Congress did not take
action, and the FAA's final and best offer became the contract.

NATCA subsequently challenged the new contract and filed charges
with the Federal Labor Relations Authority (FLRA). In the summer of
2007, the FLRA dismissed all of the charges raised by NATCA and
concluded that that there was no merit to their claims, that the
FAA bargained in good faith, and that the FAA's implementation of
the contract was lawful.

More Reform Is Needed at FAA
Despite the intense resistance from the union and its
congressional supporters, the FAA's final contract terms were
comparatively mild considering the many financial and operational
problems it faces. The FAA is a government monopoly that is
struggling to operate in a fast-changing world. While other nations
have improved their aviation services and reduced air traffic
control operating costs through the privatization, contracting out,
and/or commercialization of all or some of their national aviation
systems, the U.S. aviation control system continues to operate as a
government monopoly.

American taxpayers and the flying public have already benefited
from limited reforms that policymakers implemented before the
latest controversy. Prior to the 1998 wage contract, the FAA
contracted out 187 Level 1 towers to private controller services.
The move saved taxpayers $250,000 per tower per year, according to
a review by the DOT Inspector General.

Given the subsequent escalation in controller salaries, the
Inspector General estimates that a contracting program applied to
the remaining 71 FAA-managed Level 1 towers would save $881,000 per
tower per year. Congress should encourage the FAA to pursue this
opportunity to save taxpayers an estimated $63 million per year.[4]

Despite pro-union resistance from both parties in the House and
Senate, the FAA contracted out the 2,500 employee positions in
flight service centers to a private company, saving $2.2 billion
over the next 10 years. The company will save money by implementing
new technologies and restructuring operations. These new
technologies will allow the number of flight service centers to
shrink from 58 to 20 and the number of government workers to fall
from 2,500 to 1,500-all while providing the same or better
services.

What the Administration and Congress Should Do The Administration and Congress should build on its
heretofore successful resistance to NATCA's excessive wage demands,
as well as on related privatization experience, by pursuing a
comprehensive restructuring strategy that will move the FAA into
the 21st century. To achieve this end, the President should:

Veto any legislation that overturns or modifies the
2006 contract settlement with the air traffic
controllers.

Expand competitive contracting and privatization
opportunities at FAA, such as those that already have
reduced costs and improved safety in the system.

Develop legislation to privatize or commercialize the
entire air traffic control system. Over the past decade,
many other countries have moved to privatize or commercialize their
entire air traffic control systems. Indeed, notwithstanding
President Clinton's ultimate concession to the controllers union in
1998, his Administration conducted a detailed and positive review
of such a privatization,[5] and Vice President Gore's Reinventing
Government initiative reviewed this outcome favorably. As much of
the world continues to flee from the destructive consequences of
socialism, the United States could at least join the auxiliary
movement by committing to a formal study of the costs and benefits
of privatizing air traffic control.

Conclusion
The Administration has had some success in enacting reforms that
undermine the forces of privilege and entrenchment within the
federal bureaucracy. One particular success was enhancing the
quality of the FAA's flight service centers while reducing costs
and improving service and technology.

Resisting congressional efforts to provide excessive pay increases
to the air traffic controllers presents another challenge and an
even greater opportunity for the Administration. Following a
successful veto of the bill, the FAA should set a goal of
contracting out the remaining government-operated Level 1 towers to
achieve the estimated savings of $63 million. Once this is
accomplished, the FAA should introduce legislation to commercialize
its air traffic control system by spinning it off into a
not-for-profit government corporation.[6]

Ronald D. Utt, Ph.D.,
is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A.
Roe Institute for Economic Policy Studies at The Heritage
Foundation.